Using disability benefits to pay an IVA – 2023 Guide

Using disability benefits to pay an IVA – 2023 Guide

You can start an IVA if you receive disability benefits such as PIP or DLA. Some of this money can be used to fund IVA payments if you like. But you can’t be forced to use disability benefit to pay an IVA.

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Do you have to use disability benefits to pay your IVA?

You don’t have to include your PIP or DLA disability benefits payment when working out what you can pay into an IVA.

The payment amount is calculated by deducting your total monthly living expenses from your total income. You should list the disability money you receive as part of your income. However, you should then add the same amount in your expenses budget under the heading “disability expenditure”. In this way the two simply cancel each other out.

You don’t have to justify what you spend your disability benefits money on. As long as you still have sufficient disposable income to make the minimum payment required, you can go ahead with an IVA.

But what if there is not sufficient money from your other forms of income to meet the minimum payment?

Don’t worry. You can still go ahead with an IVA in these circumstances. But you will simply need to choose to use some of your disability benefits to top up your payment.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

Are your ongoing benefits payments affected by an IVA?

If you start an IVA, your disability benefits will not be affected in any way. Any PIP or DLA money you get will continue to be paid into your bank account as normal.

Remember, if you owe money to your bank, it is likely that you will need to open a new account before starting your IVA. This is to ensure that the bank does not take money from your account to pay what you owe.

Once your new account is open, you will need to change your bank details with benefits agencies. It is sensible to sort this out before starting your IVA because it can take a month or so for the change to take place.

Once you are in an IVA, your credit rating will be negatively affected. However this does not have any impact on your disability benefits. They will continue to be paid to you at exactly the same level.

Is an IVA the best solution if you get disability benefits?

If you receive disability benefits, starting an IVA could be a good option to manage your debts. However, this is not always the case. It depends on your wider circumstances

Where you are a home owner, an IVA is likely to be a sensible option because it will protect your property from your creditors. However, you should also consider a debt management plan.

A debt management plan is a more flexible solution. Unlike an IVA, you will not be required to try and release equity from your home in the 5th year of the agreement.

If live in rented accommodation, you should also think about the option of going bankrupt. This might sound scary, but it is likely you have nothing to lose.

A huge advantage of bankruptcy over an IVA is that you pay no monthly payment if you can’t afford to make one. This is often the case if you receive disability benefits and your overall income is relatively low.

Once you are bankrupt, non of your disability benefits are taken from you. You pay nothing more and your debts are written off after 12 months.

On disability benefits and thinking about starting an IVA? Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

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